Korn Ferry Records Seven Percent Revenue Gain

September 7, 2017 – Korn Ferry (NYSE:KFY) posted 2018 fiscal first quarter revenues of $401.3 million, an increase of 6.8 percent from $375.6 million during the same period last year. This topped Wall Street forecasts, which expected revenues of $389 million.

Korn Ferry’s executive search revenue was $161.2 million for the quarter, an increase of 10.1 percent compared to last year.

By region, search revenues were up 12.3 percent in North America, 13.4 percent in the EMEA region, 9.9 percent in Asia Pacific and down 19.9 percent in Latin America.

Futurestep, the company’s professional level and RPO recruiting business, saw revenues climb to $60.6 million, an increase of 10.8 percent, compared to the year-ago quarter. Hay Group contributed $179.5 million, up 2.8 percent.

The Los Angeles-headquartered executive recruiter and leadership consultant —the largest in the Americas as ranked by Hunt Scanlon Media — recorded net income of $29 million, or 55 cents per share, compared to earnings of $23.9 million, or 53 cents per share, last year. The results beat Wall Street expectations. The average estimate of four analysts surveyed by Zacks Investment Research was for earnings of 53 cents per share.

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“I am pleased to report fee revenue of $401.3 million, up almost seven percent year over year (almost eight percent on a constant currency basis), for our recently completed first quarter,” said CEO Gary D. Burnison. “Profits were also strong, with diluted earnings per share and adjusted diluted earnings per share of .51 and .55 and adjusted EBITDA of approximately $59 million.” All three of the company’s business lines experienced growth.

“We are making substantial investments in our operations and offering progressive solutions for the talent and organizational challenges faced by our clients,” Mr. Burnison said. “Our company stands at the intersection of talent and strategy and more than ever we’re helping our clients drive performance through their people.”

Korn Ferry continued to return capital to stockholders during the quarter, paying $5.8 million in dividends and repurchasing $4 million worth of its outstanding shares. As of Sept. 5, the cumulative share repurchases since the program started last October amount to $57.4 million, which equates to almost two million shares. On Tuesday, the firm declared a quarterly dividend of .10 per share, payable on Oct. 13 to stockholders of record on Sept. 27.

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Hedge Fund Investing Activity

Publicly held search firms, namely Korn Ferry and rival Heidrick & Struggles, have recently seen a flurry of investor activity. Hedge funds, in particular, have been acquiring new stakes in both companies, while others have been reducing positions and moving on to other investments throughout the talent management sector.

A number of institutional investors have recently added to or reduced their stakes in Korn Ferry’s stock: State of Alaska Department of Revenue increased its stake in shares of the company by 78.8 percent recently, according to its most recent 13F filing with the Securities and Exchange Commission (SEC). The fund owned 11,334 shares of the business services provider’s stock after buying an additional 4,994 shares during the period. Alaska’s Department of Revenue holdings in Korn Ferry were worth $391,000 at the end of the most recent reporting period.

Other hedge funds and institutional investors also recently added to or reduced their stakes in Korn Ferry stock. Bank of Montreal raised its position by 1.7 percent in the second quarter. It now owns 3,166 shares of the search company’s stock, valued at $110,000, after buying an additional 52 shares. Louisiana State Employees Retirement System recently raised its position in Korn Ferry by .4 percent. It now owns 23,400 shares of the stock, valued at $737,000, after buying an additional 100 shares during the period. Envestnet Asset Management raised its position in Korn Ferry by 17.6 percent and now owns 4,979 shares of the company’s stock, valued at $147,000, after buying 744 more shares. Mason Street Advisors recently raised its position in Korn Ferry by 6.1 percent and now owns 13,427 shares of the company’s stock, valued at $423,000, after buying an additional 774 shares. Finally, UBS Asset Management Americas raised its position in Korn Ferry by 4 percent. It now owns 22,877 shares, valued at $673,000, after purchasing an additional 879 shares. Currently, 90.12 percent of Korn Ferry’s stock is owned by institutional investors.

Analysts Weigh In

Several equity analysts have recently weighed in on the company: BidaskClub lowered Korn Ferry from a “hold” to a “sell” rating in a recent research report. Sidoti & Company began coverage on the company in a report in June. The research provider set a “buy” rating and a $43 target price on the stock. In addition, Zacks Investment Research recently lowered Korn Ferry from a “hold” to a “sell” rating in a research report. Two analysts have rated the stock with a sell rating, three have assigned a hold rating and three have assigned a buy rating to the company. The company currently has an average rating of “Hold” and a consensus target price of $32.

Mr. Burnison sold 58,837 shares of the company’s stock in July. The CEO’s shares were sold at an average price of $34.41, for a total transaction of $2,024,581. He now directly owns 251,485 shares of the company’s stock, valued at $8,653,598. The sale was disclosed in a legal filing with the SEC. Also, CFO Robert P. Rozek sold 11,000 shares of stock in June. The stock was sold at an average price of $34.48, for a total transaction of $379,280. Mr. Rozek now directly owns 111,782 shares, valued at $3,854,243. Insiders sold 183,837 shares of company stock valued at $6,336,501 in the last three months. Company insiders own 1.19 million of the company’s stock.

Korn Ferry expects revenue in the range of $412 million to $428 million for the fiscal second quarter. Its shares have climbed 13 percent since the beginning of the year. In the final minutes of trading on Wednesday, shares hit $33.20, a rise of 39 percent in the last 12 months.

Contributed by Scott A. Scanlon, Editor-in-Chief; Dale M. Zupsansky, Managing Editor; Stephen Sawicki, Managing Editor; and Will Schatz, Managing Editor – Hunt Scanlon Media